On Wednesday (GMT+3), the US Energy Information Administration reported a decrease of 2.762 million barrels in its crude oil inventories for the week of 24 June. This is more than the forecasted decrease of 569,000 barrels and the previous week’s decrease of 386,000.
Meanwhile, gasoline stocks increased by 2.6 million barrels, while production averaged 9.5 million in the same week – the highest production levels since April 2020 as refiners ramp up their production.
Despite the increased demand for crude seen from the decrease in US inventories, oil prices slid about 2% on Wednesday. “The rise in petrol and distillate inventories eases the pressure a bit and the uptick in US production also factored into the price decline,” said John Kilduff, partner at New York’s Again Capital LLC. In addition, Broad-based US dollar strength has also put pressure on the price of crude, which has been trading mostly sideways in the $109 range on Thursday so far.
With an annualised US GDP drop of 1.6% against the expected 1.5%, investors are also worried that a slowing economy could put a dent in demand for energy.
Both WTI and Brent crude futures for August dropped 0.2%, to $109.58 and $116.0 respectively.
Concern over the supply lost to Russian sanctions is still one of the main movers of oil prices, especially since OPEC has announced that it was lagging on production capacity – over 500 million barrels less than stated in an agreement made in May 2020.
Meanwhile, the Chinese government has said that if crude hits $130, it will subsidise refiners to ease the burden on manufacturers and consumers. According to Goldman Sachs’ global head of commodities research, $130 is not far off as upside risk in crude oil and refined products “is tremendously high right now”.
Investors are now advised to continue paying close attention to the upcoming OPEC meeting at 13:00 (GMT+2) on Thursday, 30 June.
As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.